Tag Archives: stakeholders

CSR survey: only 27% of the CSR reports explicitly quantified objectives

budget cuts - the axeman cometh
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A recent study – “CSR Trends” reviewed 602 companies listed in five Standard & Poor’s indices, as well as private companies and crown corporations. The survey does not evaluate the accuracy of the information being reported in the documents or a company’s compliance with any regulation but rather how effective companies have been in communicating their CSR strategies and performance.

The results show that CSR has changed from a nice activity to a core business value that defines the most significant businesses in the world. There are, however, differences in the way CSR results are communicated and here are some key findings:

–    81% of companies have CSR information on their websites but only 50% consider this information sufficiently important to deserve a link on the corporate home page;

–    80% of the companies, many of them worldwide brands such as Coca Cola, Nike, IBM, provide comprehensive explanations of their business activities. Surprisingly, 20% of the companies, many of them smaller and less well known than the multinationals mentioned above, did not provide a profile, essentially eliminating the context of their CSR strategies and achievements;

–    Targets that are specific, measurable and have a deadline are significantly more meaningful than a general statement of good intend. Nevertheless, only 65% of companies seamed to realise that and include a summary of objectives on a dedicated space inside the report and only 27% of those objectives have been quantified.

–    CSR is an interactive endeavour that requires constant communication with stakeholders. However, only 24% of companies use social media such as Twitter or Facebook to communicate their CSR activities.

This survey’s research was conducted jointly by PricewaterhouseCoopers’ Sustainable Business Solutions practice and Craib Design & Communications. The entire report can be downloaded here.

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Restructuring checklist #2

Managing your employment brand

• Have you thought about how best to minimise the negative impact of restructuring on your employment brand values?
• Do you need to reinvigorate your employment brand initiatives for future talent acquisition?
• Do managers know what you are expecting of them when it comes to maintaining the equity of your employment brand?

Communication

• Do all your stakeholders (shareholders, employees, suppliers, community) know what your vision is for the organisation going forward?
• Is the message clear and supportive to your business plans?
• Have you considered the customer perception of your restructuring actions?

Consultation steps

• Have you considered what your employee relations strategy needs to be during a restructuring phase?
• Have you built in the time necessary for consultation in all the markets in which your business operates?
• Do you need the approval of any employment inspectorates before you implement your restructuring proposals?

Hiring freezes

• Are you prepared to stop external hiring to ensure that future employment opportunities are available to your existing employees first?
• Are you required to stop hiring in some markets where you are implementing compulsory redundancies?
• Are you going to police the consistent application of any hiring freeze you announce?

You may also want to read:
10 guiding questions to help restructuring initiatives
Restructuring checklist #1
Restructuring checklist #3

Restructuring checklist #1

Business drivers

• Which parts of the business are growing? Which are shrinking? How do you respond to both?
• Does your business evolution require new capabilities? If so, do you have a strategy for putting these capabilities in place?
• What is the acceptable pay-back time for any restructuring programme in your business?

Organisational redesign

• What should your future organisation look like in its customer-facing activities?
• Should you explore alternative channels of distribution to optimise customer reach?
• Is there scope to rethink your support structures? Are they providing you with the mix of cost efficiency, speed and customer orientation that your business requires? Have you benchmarked these features against your competitors?
• Is there an opportunity to rethink your operating principles to reduce costs through virtual teamwork, outsourcing and/or centres of excellence?

Cross-jurisdictional consistency

• Is your business operating in multiple jurisdictions? If so, have you thought through the differing legal requirements which restructuring activities prompt in these locations?
• Do you have an overarching commitment to consistent treatment of employees?
• Have you consulted appropriately at international level as well as at local levels?

Maintaining engagement

• How do you plan to maintain engagement levels in your business? Have you considered the retention challenges that may be prompted by restructuring?
• Are the challenges and associated time-frames you are setting out for your business attainable?
Do you have clear measures in place to ensure that you can respond swiftly to downturns in engagement levels within your business?

You may also want to read:
10 guiding questions to help restructuring initiatives
Restructuring checklist #2
Restructuring checklist #3

Who benefits of lobbying self regulation?

Romanian readers may find useful the following resource on the subject of lobbying:
www.reglementare-lobby.ro

Commissioner Siim Kallas announced considers as a great success the fact that 2,100 lobbyists voluntarily registered themselves in the EC’s “Register of interest groups”. Is this the case?

A possible answer as well as an analysis of what lobbyists self regulation may bring to improving transparency in Romania can be found in an article I wrote for Forbes Romania (available in Romanian only):
“Who benefits of lobbying self regulation?”, Forbes Romania No. 20, 14-27 December 2009

“How do you manage your business?” – European Corporate Performance Management Survey

PricewaterhouseCoopers conducted an extensive research to understand if, and to what extent, Corporate Performance Management (CPM) is implemented in businesses today and how it contributes to a companies’ success. The survey was conducted from September 2008 to April 2009 in 22 European countries. Nearly 400 companies took part and supplied the necessary data to answer the following questions:

  • To what extent are CPM programmes set up across Europe to increase the quality of management information?
  • What does CPM look like in the operational reality of businesses today?
  • What is the current development level of CPM and does this level differ between regions (East and West) and industries?
  • What are the biggest obstacles in implementing CPM programmes?
  • How well do companies rate their ability to ‘operationalise’ strategic goals through CPM initiatives in order to provide greater transparency of profitability?
  • How well do they leverage information technology to enable and realise a better CPM?
  • What are the future trends in CPM?

The high level of interest shown indicates that companies have realised the importance of CPM in improving the quality of business management. From smallscale companies with less than 100 million euros in revenue (22%) to blue chips with recorded revenue of more than 5,000 million euros (18%), CPM is a topic of particular relevance. Significant differences between regions (East and West) and industries are highlighted on the following pages.

The results of the survey reveal that there is still room for improvement and that the perceived quality is sometimes higher than what is actually delivered. To define corporate strategy and cascade it into business unit strategies, companies need an integrated set of processes, guidelines and tools. Participants acknowledge the challenge posed by communicating their strategies on all organisational levels and about 90% have implemented, or plan to implement, related communications tools. Nevertheless, only 33% use strategy maps as a tool to communicate their strategy.

Value-based performance management approaches are not included in the KPI set-up of most of the companies participating. The survey shows that at present only 30% rely on value-orientated KPIs, such as Economic Value Added (EVA), as leading performance indicators. The negligence of value-oriented KPIs can however result in the fact that the needs of company’s key stakeholders are not properly accounted for. Companies have to deal with a wide spectrum of investors with differing interests. Only those offering investors the opportunity to earn adequate returns will survive in the long run. Therefore, managers should see their companies from the angle of their investors. They should focus on the enhancement of value to increase their attractiveness for investors in the competitive business environment of today.

It is remarkable that the importance of cash flow analysis and integrated cash flow planning is often neglected. 22% of the participating companies do not perform cash flow analysis on a regular basis. Cash flows are not static and depend much on changes in market forces, competitors, suppliers and customers. Companies need to measure their “liquidity” on a regular basis and track the generation of cash especially in times when illiquidity becomes the major threat for businesses around the world.

The majority of participating companies spend more than three, and even up to six months a year on planning activities. Best practice companies show that it is possible to spend less than three months’ time on annual planning and budgeting activities.

In terms of organisation, companies identified complex hierarchies, missing responsibilities, undefined escalation rules and delayed delivery of information as major obstacles to improving the quality of business management through CPM. To overcome actual obstacles companies plan different initiatives, and CPM itself is developing further.

The top three trends are:

1) From data collection to data analysis

Companies currently spend too much time on non-value creating activities such as data collection, calculation, reconciliation and structuring. This means that the time available for beneficial decision-making is insufficient. While non-value creating activities currently take up to 59% of time available, companies would like to reduce this to 33%.

2) Further investments in business intelligence (BI)

Companies seem to have perceived the great benefits of BI systems as more and more companies are investing in such technologies. Some are already trying to improve the performance of already implemented BI solutions to further enhance their CPM systems. Expanding BI to focus on strategy in addition to operational aspects is essential for driving business success. The survey results show that more than 50% of the companies which are not using BI are unsatisfied with their data delivery. On the contrary, from all companies which have BI in place more than two-thirds are satisfied with their data delivery.

3) Reducing the budget cycle time

The third trend is the increasing interest in innovative budgeting and forecasting approaches, such as Better Budgeting and Beyond Budgeting. Even though Beyond Budgeting is more an academic discussion and not yet a solution for all businesses, more than 20% of the respondents are considering this concept and some of them are already partly applying it.

You may find more about PricewaterhouseCoopers’ understanding of Corporate Performance Management and survey results at: PwC CPM Survey

Corporate social responsibility: the importance of corporate environmental, social, and governance programs

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A recent McKinsey Survey shows that the perceived importance of corporate environmental, social, and governance programs has soared in recent years, as executives, investors, and regulators have grown increasingly aware that such programs can mitigate corporate crises and build reputations. However, no consensus has emerged to define whether and how such programs create shareholder value, how to measure that value, or how to benchmark financial performance from company to company.

The McKinsey survey asked CFOs, investment professionals, institutional investors, and corporate social responsibility professionals from around the world to identify whether and how environmental, social, and governance programs create value and how much value they create.

Results show that, among respondents who have an opinion, 67% of CFOs and 75% of investment professionals agree that environmental, social, and governance activities do create value for their shareholders in normal economic times. By wide margins, CFOs, investment professionals, and corporate social responsibility professionals agree that maintaining a good corporate reputation or brand equity is the most important way these programs create value.

Respondents to this survey are split over whether putting a financial value on social programs would reduce the reputational benefits to companies: slightly more believe stakeholders view financial value creation as important than believe it’s a distraction.

Investment professionals generally agree that the global economic turmoil has increased the importance of governance programs and decreased the importance of environmental programs to creating shareholder value. Respondents do, however, largely agree that environmental and social programs will create value over the long term, and that governance programs create value in both the short and long terms.

Some 67% of CFOs, investment professionals, and corporate social responsibility professionals also believe that the shareholder value created by environmental and governance programs will increase in the next five years relative to their contributions before the crisis. Expectations of social programs are more modest; half of respondents say these programs will contribute more value.

Most respondents cite attracting, motivating, and retaining talented employees as one way that environmental, social, and governance programs improve a company’s financial performance, but few respondents think communications could be improved by reporting data in this area.

Some future perspectives
• A clear first step would be to develop metrics that focus on integrating the financial effects of environmental, social, and governance programs with the rest of the company’s finances.
• A few companies see environmental, social, and governance programs as an opportunity to create new revenue streams. Given investors’ demand for financial data, companies could benefit from explicitly including these programs and their revenue streams in planning and reporting.
• Corporate social responsibility professionals can help their own companies and their investors fully value their environmental, social, and governance programs by understanding how various stakeholders see them and by learning to communicate their value.

McKinsey’s survey included responses from 238 CFOs, investment professionals, and finance executives from the full range of industries and regions and it was conducted along with a simultaneous survey of 127 corporate social responsibility professionals and socially responsible institutional investors.

Internal Audit changing expectations: from a controls-focused approach to a risk-centric mindset

Rapid change is quickly transforming the practice of internal audit raising significant issues for audit leaders and their chief stakeholders. As I highlighted in the article “Internal Audit Changing Expectations,” written for the “Financial Audit” Journal (published in April 2009), there is a clear gap between the current focus of many internal audit functions and where they need to set their sights in order to deliver greater value to their stakeholders.

Since the passage of the Sarbanes-Oxley Act (2002), internal audit groups have been concentrating on financial and compliance risks, traditional areas of focus where their confidence levels are typically high. Consequently, to address the rising expectations of their chief stakeholders, internal audit groups tend to sharpen their focus on strategic, operational, and business risks.

Within the article I concluded that, throughout the next years, the value of controls-focused approach is expected to diminish as internal audit tends to adopt a risk-centric mindset. Study results indicate that five identifiable trends – globalization, changes in risk management, advances in technology, talent and organizational issues and changing internal audit roles – will have the greatest impact on internal audit in the coming years.

You may find bellow a PDF copy of the article (Romanian version with English abstract):
“Internal Audit Changing Expectations,” Financial Audit Magazine No.4(52), Chamber of Financial Auditors of Romania, Bucharest, April 2009, 26-34

Crisis and stakeholder management

Whenever we talk about crisis, liquidity problems, news media reactions and contingency planning, we tend to overlook an essential consideration: the severity of the crisis is not only determined by the problem itself but also by the affected stakeholders and their reactions to what is happening.

When organisations are facing a crisis, such as cash flow problems, you need to deliver quick and effective results. Ideally, such issues should be managed by an experienced person or team (depending on the level of crisis) with a strong track record in managing stakeholder relationships and significant expertise in crisis situations with financial, resource and time constraints.

In the short term, you should focus on stabilising the financial position of the business and obtain both management and stakeholder buy-in. In the longer term, you should rebuild confidence and relationships whilst regaining control, keeping all parties informed every step of the way.

Here are some potential issues you could encounter during crisis:

  • You experience increasing tension with stakeholders;
  • You have or anticipate cash flow problems;
  • You are experiencing increasing working capital levels;
  • You are experiencing share price falls;
  • You are experiencing unexpected business surprises.

As solutions for the problems above, you could consider:

  • Identifying your key stakeholders as some may be more important than others;
  • Involving your key stakeholders in the process;
  • Quickly stabilising the business;
  • Exploring quick win cash generation opportunities;
  • Rebuilding stakeholder confidence in the business;
  • Improving sustainable working capital;
  • Drive robust financial information.

Once your business is back and running there are two groups of people who need to be kept informed of progress: your own employees and your key stakeholders. The most effective way of communicating progress is via regular progress reports. The reports, e-mailed to all relevant parties, should help you rebuild confidence.